At 14:44 Beijing time on September 15, 2022, Ethereum achieved a phased leap and officially completed the "merger".
Ethereum merger is one of the important steps in the upgrade process of Ethereum 2.0. In this step, the main network will merge with the beacon chain proof of stake system. After that, Ethereum will launch a shard chain, marking the elimination of Ethereum's proof of work and a complete transition to proof of stake. After the merger of
, Ethereum's energy consumption decreased by about 99.95%, which means that the maintenance of the Ethereum network basically eliminates the demand for energy, but uses the staked ETH to protect the network, providing higher scalability, security and sustainability for the main network.
A brief understanding of the merger, let’s first think of a question: Why should Ethereum merge?
1. Transaction processing speed is faster. Because Ethereum 1.0 can only process 15 transactions (TPS) per second, due to the rapid growth of transactions, 1.0 cannot carry Ethereum's rapidly growing transaction scale. For this reason, the Ethereum Foundation has been committed to network upgrades, trying to improve the security, speed, efficiency and scalability of the Ethereum network. After this merger, PoS (Proof of Stake) will replace Ethereum's existing PoW (Proof of Work). On the PoS blockchain, staking is a process of actively participating in transaction verification, and is expected to achieve a processing speed of 100,000 TPS per second, even far exceeding traditional financial payment services, greatly expanding the breadth of projects and applications that can be built on the Ethereum blockchain. Even after the merger, the block block time of Ethereum (the frequency at which a block is added to the Ethereum blockchain) does get slightly faster, from the average block time of 13.6 seconds to 12 seconds. This means a 12% increase in trading capacity, thus reducing gas costs by 12%.
2. Reduce energy consumption. Proof of work is trustworthy and reliable, but it also has its drawbacks. The first disadvantage is energy consumption. On the PoW chain, validators (also known as "k-workers") compete with each other, calculate the encryption equation, and verify the next batch of transactions after getting the answer. If you are the first to find the solution, you will get some ether . If you don't have the most advanced hardware, you can't win a computing competition and you'll increase your electricity bill in vain. Because hardware is crucial, these operations consume a lot of power. Although the US dollar and gold in the world currency need to consume more energy, the energy consumption of K-K is definitely not small. And when Ethereum switches from PoW to PoS, energy usage is expected to drop by 99.98%. There is no need to use large-scale K. As long as you have an laptop, , you can run the rights verification. And they no longer need competitions and do massive calculations, so there will be no large amount of useless energy consumption. The computer running the verification node consumes not much power compared to the one used normally.
We have to admit that Ethereum has indeed been merged successfully, but at the very bottom of it, has the Ethereum merger truly succeeded?
First of all, the merger of Ethereum did not attract new users. If anything wants to grow and grow, it must constantly attract new supporters, new followers and users. Although it is too early to assert this, it is important to note that we are in the winter of crypto, and data shows that the merger of Ethereum has not brought any new users to its ecosystem.
secondly did not stimulate the increase in trading volume. It can be seen from the on-chain data of Coin Metrics that after the merger, the average number of transactions in Ethereum has almost no change.
transaction cost does decrease, but data shows that Ethereum's gas price has fallen sharply since last year. Moreover, lower Gas costs will lead to a loss of interest on the project, which may be related to the loss of the price of its underlying asset.
Ethereum 2.0 has achieved great success in reducing energy consumption, with energy usage estimated to drop by 95% - 99%. While it is uncertain whether this will come at the expense of ecosystem security, censorship resistance and other possible unknown consequences, this reduction is the cornerstone of the merger, and while its positive impact may not be seen for some time, it will certainly strengthen Ethereum's long-term success, as the world will only strengthen its energy-efficient regulations.As the world becomes more environmentally friendly, this may also be the reason why more people are attracted to join in the future.
This is the most important aspect of the merger, and even if all other hopes are lost, the energy aspect will prove increasingly important and benefit ether in the decades to come, and we haven't even started to see its impact. Therefore, if the merger is only successful for this reason.
After the merger of Ethereum:
The positive impact of the merger of Ethereum will not be explained in detail, but mainly briefly explain some of my concerns about the merger of Ethereum.
1. There are uncertain risks in the market. Any failure caused by the merger, especially if user funds are damaged, can lead to reputational risks and devaluation of the Ethereum network. This depreciation may not be limited to Ethereum, but may disrupt the entire cryptocurrency market, resulting in a significant increase in the duration and severity of the crypto market's cold winter. I noticed that due to the impact of this incident, in the long run, in addition to the large number of worried "K workers" who were worried about how to deal with the graphics cards they had stockpiled in their hands, Nvidia, which has been in full swing in recent years, has also been affected by the "big changes" of this cryptocurrency giant.
Since mid-August, with the approaching date of Ethereum's "merger" and the intensive reports from multiple media outlets, Nvidia , which has been "declining" for nearly a year, has not only failed to curb the continued decline, but has continued to decline with a more obvious " diving " momentum, continuing to reduce the overall market value of this global technology giant. There is no doubt that the "merger" of Ethereum directly affects the "K factory", and the graphics card manufacturers led by Nvidia are affected.
2.ETH Reduction of
After the merger, the annual ETH issuance will be reduced from 4.3% to 0.43%. This is because the PoS consensus mechanism brings a fundamental improvement in efficiency. PoS aims to provide the highest level of blockchain security at the lowest cost and transfer these savings to ETH by reducing the amount of ETH required to be issued for payment security.
3. The power of pledge is becoming more and more concentrated
My biggest worry, like many friends, is that the power of pledge is becoming more and more concentrated. With the launch of staking services by companies such as Lido and Coinbase, a large number of ETHs have been locked by a few validators. There are 240,000 validators on the beacon chain, but the pledged ETH only corresponds to a few pledgers. Lido alone has about 30% of the pledge. This is a worrying question, if someone hoards 51% of all pledged ETH, or if some pledgers collude to maliciously acquire the rest of ETH, a 51% attack will appear. There is currently no clear way to prevent 51% attacks, we can only choose the staking pool in a dispersed manner, or run our own verification nodes. Lido has long been the only option for liquid staking, but now with the emergence of other staking pools, such as RocketPool and Coinbase's upcoming cbETH liquid staking tokens, it can reduce the impact of Lido on the market. For me, this is the biggest concern, and the Ethereum community needs to find a solution as soon as possible. Lido has no malicious behavior at present, but there is no reason to concentrate its power in the hands of a few network operators.
4. Not even decentralized
0 proof of stake, users can obtain passive returns by pledging ETH. The more ETH you stake, the more ETH you get (but everyone's APR is the same). Therefore, some large investors will become richer under the proof of equity, resulting in more concentrated wealth and decentralization will be impacted.
In short, the merger of Ethereum is a historic step, and overall it has many advantages, such as faster transaction processing and reduced energy consumption, but this also brings some worrying disadvantages: uncertain risks in the market, reduced ETH issuance, increasingly concentrated staking power, and less decentralized. But I still hope that the merger of ETH is a good development, and our worries are just nothing more than nothing.
